Able Laboratories Turns Toes Up

This time last year Able Laboratories was basking in the spotlight of being numbered 36 in the Deloitte Fast 50 for New Jersey. With 166 percent revenue growth from 1999 to 2004, it was getting ready to move 240 workers into its $35 million manufacturing center to Cranbury.

Then Able was charged with falsifying test data on quality control. It recalled all its products, filed for Chapter 11 bankruptcy, and asked the Food and Drug Administration to let it go back into production. The FDA denied the request, so the company said on August 15 it would sell the business and assets.

Now a firm that had been worth about $100 million now has $9 million on hand, owes $40 million, and has no income. Just a few workers remain. Stockholders have filed lawsuits. "It is not likely that the common stock has any value," says an announcement on Able’s website.

Early in August the Star Ledger printed the results of a two-month investigation into this debacle. According to this article, 19 chemists had come from India on special work visas. To stay here, they had to keep working. Sometimes that meant continuing to test samples until a favorable result was obtained – and they did not record how many tests were needed to get the satisfactory result.

Then a recently hired chemist came across a bottle of tablets that failed the test for shelf life and took it to Iva Klemick, manager of the quality assurance department. Klemick, along with three executives who had been brought in to open the Cranbury facility – Joan M. Janulis, the compliance director, Garth Boehm, chief science officer, and Mauro – blew the whistle on fraudulent practices at their own company. They reported to the FDA officer in charge of the investigation that a group of supervisors and low-paid chemists "conspired to falsify tests, tamper with computer data and forge records."

Shashikant Shah, previously in charge of quality control, was demoted, and 19 chemists involved in the fraud returned to India.

While the stock was rising to more than $26, up from less than $1 in 2001, Able’s executives and directors were selling $9.5 million worth of stock. Former CEO Wadekar sold stock amounting to $1.98 million. Wadekar resigned as soon as the fraud was revealed.

Some would say the FDA inspection system failed. But in some respects the system worked. "Everyone in the chain of command responded in the right way once they got the information," Mark Ellenberg, Able’s Washington-based bankruptcy attorney has said. "The company self-reported. If it had not, production might still be going on."